Dollar Strength Fuels Canadian Dollar Plunge Amid US-Canada Trade Tensions
The collapse of US-Canada trade negotiations has triggered dollar strength, causing the Canadian dollar to plummet. The won-dollar exchange rate has remained steady in the 1,380 range due to month-end dollar selling by South Korean exporters.
According to Seoul Money Brokerage Services, the one-month won-dollar contract traded overnight in the New York NDF market was last quoted at ₩1,383.1. The recent one-month swap point (-₩0.15) suggests that the exchange rate is expected to open at a level ₩0.85 higher than the previous session's close of ₩1,382.4.
US tariff policy is at the center of the upward pressure on the dollar. The US has imposed 50% tariffs on approximately $20 billion worth of Canadian goods, including agricultural products, furniture, and cement. This move has weakened the exemption effect of the USMCA agreement.
Canada has pushed back against the US tariffs, with Prime Minister Mark Carney stating, 'When you're attacked, you're at war.' The Canadian government plans to implement retaliatory tariffs targeting US steel, dairy products, home appliances, agricultural machinery, pulp and paper, and electronics starting on January 8.
US President Donald Trump has responded by announcing that tariffs on Canadian automobiles, auto parts, and steel will be raised to 50% starting January 1 next year. This tariff premium is fueling dollar strength, with the Dollar Index rising slightly to 98.98 and the Canadian dollar trading down about 0.4% against the US dollar at 1.385 Canadian dollars per dollar.
City Index analysts noted that the daily RSI for USD/CAD entered oversold territory for the first time since January before rebounding, analyzing that this recovery is more technical short-covering than a genuine fundamental reassessment.